Morgan Stanley’s new Tesla analyst downgrades stock over valuation concerns
Morgan Stanley exited the bull camp on Tesla , saying valuation concerns outweigh its optimistic outlook for the electric vehicle maker in a huge potentially market-moving call on Wall Street. Analyst Andrew Percoco downgraded Tesla’s stock to equal weight from overweight. Percoco raised his price target by $15 to $425, but that still reflects downside of around 6% from Friday’s closing level. “Tesla is a clear global leader in electric vehicles, manufacturing, renewable energy, and real world AI and thus deserving of a premium valuation,” Percoco wrote to clients in a Sunday note, using the acronym for artificial intelligence. “However, high expectations on the latter have brought the stock closer to fair valuation.” Percoco pointed out that Tesla’s shares are trading at a whopping 30 times the firm’s EBITDA estimate for 2030. Paired with an expected underperformance compared with consensus estimates for the next 12 months, Percoco said he would “wait for a better entry.” The downgrade takes Percoco out of the majority on Wall Street, with most analysts holding either a strong buy or buy rating, according to LSEG. However, his price target is well above the average that sits around $375. Tesla shares have gained more than 12% this year, underperforming the broad S & P 500 and technology-heavy Nasdaq Composite over the same period. Percoco — who recently assumed coverage of the stock for Morgan Stanley from noted long-time Tesla bull Adam Jonas — said he expects a “choppy trading environment” for Tesla over the next year. The firm had been overweight rated on the stock since September 2023. Jonas moved into a new role within the Morgan Stanley research department focusing on AI.
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